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About Michael J. Miller

Miller, who was editor-in-chief of PC Magazine from 1991 to 2005, authors this blog for PC Magazine to share his thoughts on PC-related products. No investment advice is offered in this blog. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

D7: Will You Pay For Content? Malone Thinks You Will (Eventually)

How will people pay for content? Cable TV pioneer and Liberty Media head John Malone talked about that at the D7 conference this morning, saying that over time advertising will not be sufficient to support high-quality content, so people will have to pay for it.

Malone said he thought Hulu's advertising revenues were insufficient, and that in the long run, he didn't think advertising would be enough to support modern content.

Malone, who helped usher in paid television, said what made cable TV successful was blending together transport service and the content. At first, it was just a little more for distant broadcast, then cable added things like HBO and eventually many more channels.

In the Internet world, currently people expect things for free, he said. He talked about how he failed twice to make people pay: @Home had plans for a bundling deal of content and bandwidth; and he thought broadcasters should have charged when they switched to HD content. (Now there is a little of this through redistribution fees made to broadcast channels, but it's still small.) These both failed initially, but he said clearly advertising has proven to be insufficient to support a robust product creation and distribution business.

Malone talked about how Liberty's Discovery Channel only used the Internet for promotion today, but doesn't put up full content. But for some things, people will pay, such as professional sports such as on MLB.com or NFL games on Direct TV. But there's a big question, Malone said, about how much content has enough brand power.

In the long run, he said, he expected people will pay for content, but it's unclear whether it goes directly or through aggregators (such as Apple, Netflix, or Hulu.) Malone seems to believe that aggregator model will work in the long run, but there will be lots of companies trying to do that. He tried to do it through Vongo, but wasn't able to get enough rights.

At the conference, host Walt Mossberg asked why he couldn't get all the content he wanted over the TV whenever he wanted it, but instead needed things like DVRs. Malone said there wasn't enough capacity for simultaneous random access over today's bandwidth.

Mossberg complained about the "windows" that Hollywood users. Malone said the "sequential monetization" worked well for the studios. In part, he said, the issue is convincing the public to change, and that he said, takes time.

One issue is dealing with the existing content distribution system. That's why Discovery doesn't put all its content on the Internet: it is dependent on cable and Direct TV for 97 percent of its revenue.

Certainly, that's the issue for all sorts of content - my guess is that we will end up paying for a lot of things we now think of as free, but I agree that it will take some time.

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